First State Bank of Corwith, Iowa v. Hammond

• Decision Date: 16 February 1904
• Citation: 79 S.W. 493,104 Mo.App. 403
• Parties: FIRST STATE BANK OF CORWITH, IOWA, Appellant, v. HAMMOND, Respondent
• Court: Missouri Court of Appeals

79 S.W. 493

104 Mo.App. 403

FIRST STATE BANK OF CORWITH, IOWA, Appellant, v. HAMMOND, Respondent

Court of Appeals of Missouri, St. Louis

February 16, 1904

Appeal from Howell Circuit Court.--Hon. W. N. Evans, Judge.

Judgment reversed and cause remanded.

James Orchard and C. R. Wood for appellant.

(1) The question is: Was plaintiff an innocent purchaser for value before maturity, without notice of any fraud in the inception of the contract, and if so, then it is entitled to recover. First National Bank of Springfield v. Skeen, 101 Mo 683; Jennings v. Todd, 118 Mo. 296. (2) The consideration of negotiable paper in the hands of a bona fide holder for value before maturity can not be inquired into mala fides alone can open the door to such inquiry. Gross negligence is not sufficient, but actual notice of the facts which impeach the validity of the note must be brought home to the holder. Mayes v. Robinson, 93 Mo. 114. There is no evidence to support the verdict in this case and the court should have given instruction numbered one, offered by plaintiff, by way of peremptory instruction, directing the jury to return a verdict for the plaintiff. (3) The court erred in giving instructions numbered 1, 2, and 3. Said instructions put the burden on plaintiff to prove it was a bona fide and innocent purchaser, when in fact it devolved on defendant to show that notice of the fraud and want of consideration, and especially of the want of consideration and is a violation of all the rules laid down by the appellate courts of this State and should not have been given, for if plaintiff is an innocent purchaser before maturity, there can be no inquiry into the consideration as between the original parties. Merrick v. Phillips, 58 Mo. 436. (4) If a party shows that he acquired negotiable paper in good faith, actual notice of facts impeaching its validity must be brought home to him to affect his rights. Central National Bank v. Pipkin, 66 Mo.App. 592. And it is immaterial though the purchaser's negligence be gross. Hamilton v. Marks, 63 Mo. 167. (5) The rule that a purchaser of negotiable paper is not an innocent holder if there are circumstances connected with the transfer sufficient to put an ordinary, prudent man on inquiry, is uncertain, void of uniformity and will not be adhered to in this State. (6) The consideration of a negotiable note can not be inquired into when the same is held by an innocent purchaser until it is shown that the holder is not an innocent purchaser and had actual knowledge of the failure of consideration. Horton v. Bayne, 52 Mo. 531. (7) An indorsee of negotiable paper before maturity is presumed to be the owner in good faith and for value in the absence of evidence to the contrary. Corbey v. Butler, 55 Mo. 398.

Green & Clark for respondent.

(1) The refusal by the court to give appellant's peremptory instruction was not error. Bank v. Hainline, 67 Mo.App. 483; Brewer v. Lindsay, 72 Mo.App. 591; Mosby et al. v. Commission Co., 91 Mo.App. 500; Rice v. McFarland, 41 Mo.App. 489; Ganz v. Weisenberger, 66 Mo.App. 110; McAfee v. Ryan, 11 Mo. 365; Memphis v. Matthews, 28 Mo. 248; Morgan v. Durfee, 69 Mo. 476; Powell v. Railroad, 76 Mo. 80. (2) Where there is any evidence, however slight it may be, and whether direct or inferential, it may go to the jury, who are the exclusive judges of its weight and sufficiency, and in such case instructions in the nature of a demurrer to the evidence are properly refused. Dunbar v. Fifield, 85 Mo.App. 484; Taylor v. Short, 38 Mo.App. 21; Grant v. Railroad, 25 Mo.App. 227; Matthews v. Railroad, 26 Mo.App. 75; Charles v. Patch, 87 Mo. 450; Twohy v. Fruin, 96 Mo. 104; Bank v. Bank, 151 Mo. 320. (3) It was not necessary for respondent to bring home to appellant knowledge of specific facts that would impeach the validity of the notes in question. Evidence that the holder was aware of facts from which an inference of knowledge of a valid defense to the notes arises has been deemed sufficient for that purpose. Whaley v. Neill, 44 Mo.App. 320; Studebaker Mfg. Co. v. Dickson, 70 Mo. 272; Wright Investment Co. v. Tillingham, 85 Mo.App. 534. (4) Instructions numbered 1, 2, and 3, given on part of respondent, correctly declared the law. When the maker of a note introduces evidence tending to show that the note was procured by fraud, the burden then devolves upon the holder to show that he is a bona fide holder for value without notice. Hahn v. Bradley, 92 Mo.App. 399; Hamlin v. Marks, 63 Mo. 167; Daniel Neg. Inst. (4 Ed.), secs. 814, 815.

BLAND, P. J. Reyburn and Goode, JJ., concur.

OPINION

BLAND, P. J.

On January 21, 1901, defendant executed and delivered to the Corwith Nursery Company, of Corwith, Iowa, his two negotiable promissory notes for five hundred dollars each, payable one year after date. Plaintiff claimed to have purchased these notes of the Corwith Nursery Company, February 1, 1901. As the legal holder of the notes, plaintiff brought this suit thereon against the defendant in the Howell circuit court.

The answer of the defendant alleged that the notes were procured by false and fraudulent representations and that the consideration for them had wholly failed.

After proving the indorsement and transfer of the notes to it on February 1, 1901, plaintiff offered them with the indorsements in evidence. Defendant offered evidence tending to prove that the notes were obtained by false and fraudulent representations made to him by Uecke, secretary and manager of the Corwith Nursery Company, and that the consideration for which the notes were given had wholly failed. Defendant testified that about February 27, 1901, he wrote to plaintiff asking for information as to the standing of the nursery company; that he thereafter received the following reply written at the bottom of his letter: "We do not have their account and can not say how they are. Respt., J. H. Standring, Chr. 3-1-1901." J. H. Standring testified that he was cashier of the plaintiff bank; that he as such cashier bought the notes of the nursery company about February 1, 1901, paying one thousand dollars in cash for them; that the purchase was made in good faith without knowledge of any fraud or failure of consideration of the notes, that the nursery company had ceased to do business. It appears from the testimony that the defendant, at the time he gave the notes and thereafter, was a resident of Howell county.

Plaintiff moved for a peremptory instruction to the jury to find for it which the court refused.

The court gave the following instructions for the plaintiff:

"2. The court instructs the jury that the plaintiff sues on two promissory notes for five hundred dollars each, executed by the defendant to the Corwith Nursery Company, on the twenty-first day of January, 1901, each payable one year after date, bearing interest from date at the rate of eight per cent per annum; that the plaintiff, the First State Bank of Corwith, Iowa, claims to have bought said notes for value before maturity, in good faith, without knowledge of any fraud or false representation made by the nursery company to the defendant; that defendant admits the execution of said notes, but claims that said notes were executed by false and fraudulent representations, and that he was induced to sign the same by said false and fraudulent representations by the Corwith Nursery Co. and he claims that plaintiff had full knowledge of said false and fraudulent representations and that the plaintiff, the First State Bank of Corwith, Iowa denies said charges and says it was a purchaser for value, before maturity, in good faith, without knowledge of any fraud. The jury is, therefore, instructed that if you find from the evidence that the plaintiff purchased said notes before maturity, in good faith and for a valuable consideration, without...